The foreign exchange market – popularly known as the forex market – is by far the biggest financial market in the world. It is a global financial market where trillions of dollars in currency are traded daily. As the largest financial market in the world, it is also the most liquid.
Interestingly, the forex market is not a centralised financial market like, for example, the New York Stock Exchange. Rather, instead of a central marketplace, it consists of a linkage of banks and financial institutions that act as dealers, brokers and buyers. These market participants are all connected by a complex communications network that facilitates the buying and selling of currency in real time. The forex market operates 24 hours a day, five days a week, and sees essentially all of the currencies in the world trading in the major financial centres – though the forex market largely consists of three major market segments in Australasia, Europe and North America.
With an estimated daily turnover of around $6.6tn, according to a report by the Bank for International Settlements from 2019, and plenty of liquidity, it is understandable why so many traders have been attracted to trading the forex markets. This has been helped by the many forex trading platforms that have emerged in recent years, which have made it easier than ever to trade the live markets. As a result, forex trading is now one of the most popular forms of retail trading for individual investors. This is in addition to the other major players trading the forex market, which include commercial and investment banks, central banks, investment funds and multinational corporations. In this article, you learn about Forex Trading in Malaysia, the main market sessions, and the best time to trade Forex in Malaysia.
Forex Trading in Malaysia
Spread across the Malay Peninsula and the Island of Borneo, for many Malaysia is better known for its gorgeous beaches, stunning rainforests, and diverse mix of Southeast Asian and European cultural influences. In recent decades, however, Malaysia has established itself as an important player in the global economy. Currently, Malaysia is the fourth largest economy in Southeast Asia. This is largely due to rising global demand for electronics, commodities (such as oil and gas), a strong labour market, and increasing infrastructure spending. Although the economic outlook did take a hit somewhat during the COVID-19 pandemic, the outlook for Malaysia is strong once again – with the IMF predicting continued growth in 2022 and 2023.
Given that Malaysia is so well-known for its openness to international trade, it is perhaps little surprise that the forex markets are so lively here. However, access to the forex markets is somewhat more tightly regulated than in other countries. While many foreign and internationally regulated forex brokers do accept clients based in Malaysia, those hoping to provide full-service offerings are generally required to have a Capital Markets Service License from the Securities Commission of Malaysia (SCM). Located in Kuala Lumpur, the SCM is Malaysia’s financial regulatory authority and has the responsibility for developing and regulating the capital markets in the country.
Although Malaysia is relatively open to international forex brokers provided that they secure the proper regulatory authorisation, the SCM has been quick to issue warnings to a number of high-profile international forex brokers in the past for failing to obtain a licence. As of 2012, Bank Negara Malaysia – the Malaysian Central Bank – has gone on the record and stated that the buying and selling of foreign currency is only legal when done through licensed commercial banks, Islamic banks, investment banks and international Islamic banks. Forex brokerages operating in Malaysia may also be subject to other local laws and regulations.
Perhaps most notably, we can see the influence of Islamic finance laws and principles on the operation of the forex market in Malaysia. This not only restricts the activities of individual investors but will also limit the international brokerages hoping to provide services here. Islamic finance laws require licensed institutions to ensure that their business aims and operations comply with the principles of Sharia law at all times.
In terms of the macroeconomic factors that shape the forex markets in Malaysia, as an economy that is extremely open to international trade, the health of the Malaysian economy does tend to reflect external demand – particularly in the Asia-Pacific region. With over 40% of the population employed in industries and sectors that service international trade, this can also have domestic consequences.
Malaysia’s top exports are integrated circuits, semiconductor devices, apparel, rubber, refined petroleum and palm oil. These are primarily exported to China, Singapore, the US, Hong Kong and Japan. As such, any economic factors impacting trade in these sectors or to these regions will inevitably have an impact on the Malaysian forex markets. In this sense, the value of the Malaysian ringgit – the country’s main currency – will be tied to these factors.
The Four Forex Market Trading Sessions
One of the unique characteristics of the forex market is that there is no centralised marketplace where foreign exchange happens. Instead, currency trading is conducted electronically ‘over the counter (OTC) across multiple time frames. This means that currency is traded via a global broker-dealer network rather than on a centralised exchange. The forex market is thus open 24 hours a day for roughly five and a half days per week. Trading takes place primarily in the major financial centres of the world, which include Zurich, Tokyo, Sydney, Singapore, Paris, New York, London, Hong Kong and Frankfurt. These trading centres make up the three segments of the forex market: Australasia, Europe and North America.
Given the locations of these financial centres, trading takes place across every time zone. This means that the forex market is open 24 hours a day on trading days. For example, when trading for the day closes in the US, it will start up again in Tokyo and Hong Kong. This helps to make the forex market both incredibly active and also fluid, given that buyers and sellers always have somewhere to conduct trades.
The major trading sessions occur in Sydney, Tokyo, New York and London. Although the time zones for the trading sessions in these locations will overlap, in Universal Coordinated Time the accepted trading time zones for each region are generally taken to be:
- Sydney: 10pm-7am UTC
- Tokyo: 12am-9am UTC
- London: 8am-5pm UTC
- New York: 1pm-10pm UTC
Although there is understandably quite a lot of debate about what trading sessions are the best to trade, one thing that is more certain is what the busiest are. According to some estimates, the London and New York sessions account for around 50% of all daily trading volume. As such, there is understandably a lot of activity occurring when these two sessions overlap.
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Best Time to Trade Forex in Malaysia
Any given forex trading week will be opened by the Australasia area, followed by Europe, and then North America. As one region’s markets close for the day, another is either already open or is just opening up. As such, these markets will often overlap for a few hours. This period of overlap often marks some of the most active trading periods given that traders from across the world will be looking to either set up their initial trades for the day or close out their positions.
As noted above, the accepted time zones for each of the major trading centres are as follows:
- Sydney: 10pm-7am UTC
- Tokyo: 12am-9am UTC
- London: 8am-5pm UTC
- New York: 1pm-10pm UTC
As you will notice, there are periods of overlap between each trading session, which creates continuity between them. These periods of overlap are generally the most active and see more concentrated trading volumes than at other times during the day. The two busiest time zones for trading are London and New York. As a result, the periods of overlap between these sessions tend to make up the majority of the daily trading volume in the global forex market.
In terms of why these overlapping periods between sessions tend to be the busiest, we need to keep one thing in mind: traders love volatility in the forex market! Although in other financial markets, volatility is often associated with negative trading conditions, constantly fluctuating prices give forex traders more opportunities to trade – and hopefully profit! For this reason, forex traders tend to prefer these periods of overlap as this is when we see the most trading activity and, as a result, the most price volatility.
With that said, if you want to trade when the markets are at their most active and fluid, you should aim to trade in the London afternoon and the New York morning. In Universal Coordinated Time, this is between 12pm UTC and 4pm UTC.
For Malaysian traders, this means that you should be aiming to trade in the following sessions if you want to take full advantage of the overseas busy periods:
- Sydney: 5am-3pm (Malaysia Time Zone)
- London: 4pm-1am (Malaysia Time Zone)
- Tokyo: 7am-4pm (Malaysia Time Zone)
- New York: 9pm-6am (Malaysia Time Zone)
With these in mind, the best time to trade forex in Malaysia is arguably between 9pm and 1am (Malaysia Time Zone), as this is when the New York and London forex markets overlap with each other. During this period, Malaysian traders can expect to see significant fluctuations in the major currencies – such as the USD, GBP and EUR – with most major traders preparing their trades for this time of the day.
Ultimately, however, if you are not too worried about optimising your trades for the forex market open time in Malaysia or when they are at their peak, you are free to trade at any time of the day. As we have seen, this is because the forex markets largely operate on a 24-hour basis during the week, making them readily accessible regardless of what time zone you are in. With that said, no matter what the forex market open time in Malaysia is, you will generally always be able to lock in a trade.
As an outward-looking nation that is heavily reliant on trading with international partners, it is understandable why forex trading would prove to be so popular in Malaysia. And thanks to clarity from the country’s leading financial regulators in recent years, it is now safer than ever to trade forex and access brokerage services. As a result of these factors, forex trading has exploded in popularity across Malaysia. Consequently, there are now more forex brokers than ever offering their services to Malaysian traders.
For the many Malaysians with a forex trading account looking to turn a profit on the live markets, the fact that the forex markets run on essentially a 24-hour basis gives them plenty of opportunities to do so. Having said that, there are certain times during the day when trading conditions are at their optimal. Thus, the best time to trade forex in Malaysia is arguable during the New York and London sessions. This will generally produce peak trading and market activity – though be careful to watch out for the price volatility! This falls between 4pm and 1am Malaysia time for the London session and 9pm and 6am Malaysia time for the New York session. Although trading in this period will not necessarily guarantee you any extra profits, it will provide you with plenty of opportunities to make trades!
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